In re Intermediate Account of Canandaigua Nat'l Bank & Tr. Co., 2022-50159

CourtNew York Surrogate Court
Writing for the CourtHon. Christopher S. Ciaccio Surrogate Judge
PartiesIn the Intermediate Account of Canandaigua National Bank & Trust Company as Trustees of the Trust created under Article VI of the Last Will and Testament of Ann B. Maloy, dated May 22, 2013, for the benefit of her husband, Charles T. Maloy.
Decision Date17 February 2022
Docket Number2022-50159,File 2013-1494/D

In the Intermediate Account of Canandaigua National Bank & Trust Company as Trustees of the Trust created under Article VI of the Last Will and Testament of Ann B. Maloy, dated May 22, 2013, for the benefit of her husband, Charles T. Maloy.

No. 2022-50159

File No. 2013-1494/D

Surrogate's Court, Monroe County

February 17, 2022


Unpublished Opinion

For the Petitioner Canandaigua National Bank Pullano and Farrow Christian Valentino, Esq., of counsel

For the Objectants Richard Maloy and Laurie Maloy Kroll Law Firm, LLP Richard A. Kroll, Esq. of counsel

For the Objectant Charles T. Maloy Finger Lakes Legal, Inc. Michael A. Rose, Esq., of counsel

Hon. Christopher S. Ciaccio Surrogate Judge

Canandaigua National Bank & Trust Company (CNB) was appointed, under Article VI of the Last Will and Testament of Ann B. Maloy, as trustee of a trust ("the Trust") created for the for the benefit of her husband, Charles T. Maloy ("Charles").

CNB commenced a proceeding in this Court, a Petition for Judicial Settlement of its intermediate account. Two of the remainder beneficiaries of the Trust, Richard Maloy and Laurie Maloy, Ann Maloys's children from a previous marriage, have filed objections to the account, claiming that CNB overpaid Charles from the assets in the Trust. They now move for summary judgment on a theory of unjust enrichment, seeking from Charles (not CNB) reimbursement to the Trust of the excessive payments.

Separately, Charles has filed objections to the account, claiming that CNB underpaid Charles in miscalculating the required withdrawals from the Trust, and that he is due and owed additional amounts from the Trust. He too has moved for summary judgment.

For the reasons below, the motion of Richard Maloy and Laurie Maloy is granted, the trustee is found to have misapplied the directive in the Last Will and Testament and in this court's 2015 Decree regarding payments of trust assets, and the beneficiary is directed to reimburse the trust in an amount to be determined at a hearing.

The motion of Charles T. Maloy is denied.

The undisputed facts are as follows.

Ann Maloy died on June 8, 2013, survived by her husband, Charles T. Maloy ("Charles") and children Richard B. Maloy, Laurie Maloy Sheller, and William J. Maloy, III. The children are the issue of Ann Maloy and her predeceased husband, William J. Maloy II (cousin of Charles T. Maloy, thus his "step"-children bear his surname).

In her Last Will and Testament ("the Will"), Ann named Charles as the executor of her estate.

She directed her residuary assets to pass into a trust, entitled the "Charles T. Maloy Trust Under the Will of Ann B. Maloy ("the Trust")," for the benefit of her husband Charles, with the remainder of the assets upon his death to pass one-third to Richard, one-third to a trust for the benefit of Laurie, and one-third to a trust for the benefit of William III.

The Trust provides that Charles is to receive the entire net income from her estate for his natural life.

Additionally, the Trust was named as the beneficiary of an Individual Retirement Account ("the Plan") that had been created and held by Ann. Pursuant to the Will, the trustee was to withdraw from the Trust "whichever of the of the following amounts is greater, and distribute the same to my husband: (i) the net income of the trust's share of the Plan for such year; or (emphasis added) (ii) the 'minimum required distribution amount' ["RMD"] which is required to be withdrawn from such share under Section 401(a)(9) of the Internal Revenue Code..."

By Decree dated June 26, 2013, the Will was admitted to probate and letters testamentary were issued to Charles T. Maloy and letters of trusteeship were issued to the Canandaigua National Bank ("CNB").

The executor elected to treat the trust as a "qualified terminable interest property" ("QTIP") trust, also known as a marital deduction trust.

In 2015 Charles, as executor, petitioned for judicial settlement of Ann's estate. Following discussions [1] regarding the application of Article VI (B) of Ann's Will (the paragraph that created the Trust) all parties and their counsel stipulated, in a signed writing, to a Decree ("the Decree") directing that the "Trustee be authorized and directed to comply with the requirement of the 4% Unitrust methodology by New York Estate, Powers and Trusts Law § 11-2.4 with respect to the calculation and distribution of Trust income to or for the benefit of Charles T. Maloy from the date of entry of this Decree." There is no dispute that the election of the unitrust option was done in order to "allow [the] trustee to invest for total return without concern for achieving a balance between income distributions and principal growth" (5 Warren's Heaton on Surrogate's Court Practice § 69.07 [2022]).

In 2020 CNB petitioned for judicial settlement of its intermediate account.

CNB stated that up through 2018 it had paid Charles the full amount of net income from the residuary assets, the full amount of net income from the Plan, and (emphasis added) the full amount of the RMD. At the end of 2018 CNB assigned a new trust administrator, Lou Rossetti, to manage the Trust. Upon review he realized that CNB had been mistakenly using "net income" to calculate withdrawals and had not applied the 4% unitrust calculation mandated by the 2015 Decree. Accordingly, at his direction CNB "began paying Charles the required 4% Unitrust...

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